Legislature(1999 - 2000)
04/10/2000 02:15 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
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HOUSE BILL NO. 58
An Act relating to certain audits regarding oil and gas
royalty and net profits and to audits regarding costs
relating to exploration incentive credits and oil and
gas exploration licenses; and providing for an
effective date.
KEVIN BANKS, (TESTIFIED VIA TELECONFERENCE), DIVISION OF OIL
AND GAS, DEPARTMENT OF NATURAL RESOURCES, ANCHORAGE, stated
that the bill would transfer oil and gas royalty audit
functions from the Department of Revenue (DOR) to the
Department of Natural Resources (DNR). He noted that it
would make sense to put tile audit duties in the same
department that administers, enforces, and is most
knowledgeable with the oil and gas-leasing program.
Mr. Banks pointed out that the audit functions previously
rested with the Department of Natural Resources, but was
switched to Department of Revenue in 1980 based on a
legislative audit report. That recommendation stated that
cost savings would be achieved by having one staff of
auditors review both tax and royalty compliance information.
Since 1980, however, the State has entered into royalty
settlements with the North Slope producers and have made
changes to tax regulations. As a result, there is no longer
as much overlap between royalty and tax audits. Separating
Department of Natural Resources duties to administer and
enforce oil and gas contracts, agreements, and leases from
the Department's ability to conduct audits leading to
possible enforcement actions, has resulted in inefficiencies
and other problems.
Mr. Banks noted that HB 58 would authorize DNR to audit
reports and costs relating to exploration incentive credits
and oil and gas licenses. It also grants the Department
audit powers commensurate to those of DOR currently,
including the right to subpoena information for audit
purposes. The two departments would be allowed to exchange
confidential information obtained in the course of their
respective audits.
Mr. Banks pointed out that language on Page 2, Section 2,
"by an agreement with the department or by
AS38.05.035(a)(9), AS 41,09.010(d)" was inadvertently
deleted in the proposed version of the legislation.
Co-Chair Therriault MOVED to ADOPT Amendment #1, which would
insert after "required" on Page 2, Line 9, "by an agreement
with the department or by AS38.05.035(a)(9), AS
41,09.010(d)". There being NO OBJECTION, it was so ordered.
CAROL CARROLL, DIRECTOR, DIVISION OF SUPPORT SERVICES,
DEPARTMENT OF NATURAL RESOURCES, observed that the
Department had submitted Amendment #2. Ms. Carroll
explained that the amendment would correct a law in the
public notice law section by removing the notice requirement
for final decisions in oil and gas lease sales. The
amendment would correct a problem by removing a separate
requirement for notice for the final decision.
JAMES HANSON, (TESTIFIED VIA TELECONFERENCE), LEASE SALE
MANAGER, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL
RESOURCES, pointed out that the notice requirement is
redundant. He explained that 180 days before the sale, the
Department issues a preliminary finding. There is a public
comment period following that. When the finding is noticed,
the public is informed when the final finding will be
issued. At the time the final finding is issued, the notice
of sale lets the pubic know that the appeal process is not
agreeing with the decision to go forward with the sale. The
30-day notice prior to that finding is simply restating what
was already said when the preliminary finding came out.
Representative J. Davies asked if that was a current
requirement in statute to be done. Mr. Hanson replied that
the requirement is that they issue a notice of the
preliminary finding and included in that notice is when the
final notice would become available. Representative J.
Davies did not understand the redundancy. He asked what
language would the Department be comfortable including.
Representative Phillips requested further testimony to
address any changes which the language could cause.
Representative Grussendorf commented that the language of
the preliminary findings might not affect the final
findings.
Co-Chair Therriault agreed that the change could cause
confusion. Mr. Hanson pointed out that the notice which the
Division is trying to eliminate, would be after the comment
period. The public comment period lasts from 60-90 days
after the preliminary findings. He stressed that it would
be "way beyond" the public comment period and serves no
purpose in the bill.
Co-Chair Therriault advised that it was his intent to hold
the bill in Committee to address the proposed language
change.
Ms. Carroll interjected that if the amendment were going to
delay the bill, the Department would request to withdraw the
proposal to change that language.
HB 58 was HELD in Committee for further consideration.
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